1. Field of the Invention
The present invention relates generally to profitability management and more specifically to a method of determining pricing to ensure profitability for a business.
2. Discussion of the Prior Art
It appears no software program exists in the art that provides a profitable selling price based on the operating budget and billable hours of a business. It further appears that no other software program calculates the operating budget for the business, allocates that budget per billable hour, tracks history and adjusts the allocation of the budget per billable hour based on accumulated variance, so as to keep the business on track to achieve a predetermined profit goal. However, there are other programs that offer profit calculations and profit analysis.
Topline's Alpha Wolf subtracts variable costs (parts and labor) from the sale price to calculate gross profit (GP), divides sales by the GP to arrive at a Cost Price Multiple (CPM), and compares the CPM to the target CPM entered in program configuration. It then warns if the sale price does not attain an adequate CPM to meet target. In addition, Alpha Wolf calculates and displays the GP per Billed Hour (BH), but it does not calculate the target GP/BH for the business or use the calculation to make comparison to a target.
Mitchell's OnDemand5 Manager/Manager Plus and RO Writer both offer Net Profit Analysis by calculating GP and additionally calculating business overhead using a fixed percentage of the total order. However, neither program offers complete operating budget calculating, nor do they automatically calculate and adjust for variance based on sales and cost history.
Accordingly, there is a clearly felt need in the art for a method of determining pricing to ensure profitability, which calculates the ratio of GP/BH for a business; calculates the ratio of GP/BH to make a comparison to a target; and calculates operating budget to adjust for variance based on sales and cost history.